1. 22 BEIJING REVIEW March 12, 2015 http://www.bjreview.com
R
obert Parkinson, founder and CEO of
RMG Selection, a China-focused interna-
tional recruitment and human resources
consultancy company, recently applied for an
ICP (Internet content provider) license for his
company and it took him less than a month.
When he carried out the same process for an-
other website five or six years ago, the whole
processtookmorethantwomonths,Parkinson
recalled.
The Chinese Government’s drive to stream-
line administration and delegate power to lower
levels has made it much more convenient for
foreigncompaniestodobusinessinChina.
“Things have become a little bit easier. The
reform has encouraged smaller and medium-
MakingItSimple
Foreign companies are finding it easier to conduct businesses in
China thanks to administrative reforms By Ji Jing
sized companies to enter the market because
it becomes quicker to establish an enterprise
withinChina,”Parkinsonsaid.
Simplifiedprocedures
Jens-Peter Otto who had worked in China for
six years as a PricewaterhouseCoopers partner,
providing consultancy for German companies
setting up branches in China, also welcomed
the simplified administrative procedures. He
was especially impressed with the abolishment
ofthecapitalverificationreport.
Inthepast,allcompanies,includingforeign-
invested entities in China, needed such reports
verifying their paid-in capital upon initial es-
tablishment of a company or when there was
a change in capital or shareholders. Reports
had to be issued by certified public accounting
firms.
The Third Plenary Session of the 18th
Central Committee of the Communist Party of
China terminated the practice in order to sim-
plifyapprovalprocedures.
“Although we would earn money because
we usually prepare this capital verification re-
port, we welcome this change that has been an
additionalburdenforcompanies,”Ottosaid.
The minimum of 30,000 yuan ($4,900) reg-
istered capital requirement for starting a limited
liabilitycompanywasremovedin2013.
“Many approval procedures have been
abolished, which has saved money and made
it easier for foreigners to start a company. As a
consequence,manyofourmembercompanies
are showing a willingness to invest in China,”
said Robert Sun, President of the American-
ChineseCEOSociety.
Broadenedaccess
In addition to measures of streamlining admin-
istration, the negative-list approach first tested
in the Shanghai Free Trade Zone (FTZ) has also
made it easier for foreign companies to start
businessesinChina.
Under the negative-list approach, foreign
investors will need to have their projects and
companiesapprovedonlywhentheinvestment
is on the negative list, which specifies areas pro-
hibitedorrestrictedforoverseasinvestors.
China has been using the Catalogue for
the Guidance of Foreign Investment to man-
age foreign investment. The catalogue lists
three categories of industries for foreign invest-
ment: encouraged, restricted and prohibited.
All foreign investments should be conducted
following the catalogue and are subject to an
approvalprocess.
However, the negative-list approach has
A “negative list” is usually appended to a bilateral
investment treaty. It specifies areas where foreign
capital is banned or limited. Areas not listed are
assumed to have no restrictions and only need to
register with relevant authorities. In contrast, in the
past, the establishment of foreign-invested enter-
prises was subject to the development approvals,
reformcommissionsandcommerceauthoritiesat
bothnationalandlocallevels.
The approach was first adopted in the China
(Shanghai) Pilot Free Trade Zone (FTZ), an im-
portant test field in China for freer trade and
a more liberal business and financial environ-
ment,launchedinSeptember2013.Itmarksan
attempt to transform the investment adminis-
tration system in China from approval-based to
aregistration-based.
An updated version of the negative list released
by authorities of the Shanghai FTZ on July 1 re-
duces the restrictions and conditions for overseas
investmentfrom190to139.
China will start substantive negotiations on the
negative list with the United States in early 2015
as part of ongoing bilateral investment treaty talks
betweentheworld’stwolargesteconomies.
The State Council decided last December to
launch three new FTZs in north China’s Tianjin,
southeast China’s Fujian Province and south
China’s Guangdong Province, where many special
measures piloted in the Shanghai FTZ will be repli-
catedincludingthenegative-listapproach.
The Guangdong FTZ will mainly serve compa-
nies in the high-end financial service industries
located in Hong Kong, the Pearl River Delta region
and Macao. The Tianjin FTZ targets those located
innorthChina,wheresome80Fortune500com-
panies have established their presence, including
many international multinational firms. Meanwhile,
theFujianFTZwillfocusontradewithTaiwan.
The negative-list approach was adopted by
a draft Foreign Investment Law released by the
MinistryofCommerceonJanuary19.
ApplicationoftheNegative-ListApproach
COVER STORY
(Compiled by Beijing Review)

2. http://www.bjreview.com March 12, 2015 BEIJING REVIEW 23
given foreign investors a
higher degree of freedom
as they only need to go
through a registration pro-
cess when the industries
they invest in are not on the
list, which can shorten the
time to obtain a license to as
littleasfourdays.
“The negative-list model
conforms to the interna-
tionalnormandtheongoing
reform of streamlining ad-
ministration in China,” said
Shen Danyang, spokesman
oftheMinistryofCommerce.
“The difficulty people
have found in the past in
doing business is that the
country gave us a very am-
biguous business climate.
No one was quite sure
what the rules were. The
government changed or had
to change the rules very rapidly, leaving no
time for administrators, lawyers and profes-
sionals to catch up,” Parkinson said.
“What the government is trying to do with
the negative-list approach and the whole con-
cept of the Shanghai FTZ is to make it easier for
people to know what is allowed and what isn’t,”
headded.
Adaptingtochanges
Although foreign companies are enjoying more
convenience while doing business in China, the
gradual abortion of the special national treat-
ment and the rising labor and land costs in the
country are causing some concerns among the
foreigncommunity.
In order to attract foreign investment at
the beginning of the reform and opening-
Nam,andIndonesiaareabletoofferlabormore
cheaply,”saidParkinson.
However,hethinksthatthisshouldnotbea
question of concern because the key to China’s
sustained economic growth is to spur domestic
consumption.
“Once foreign investment is introduced to
the service sector, there will be more competi-
tion between domestic and foreign companies
in the industry, which will inevitably lower prices
andencouragespending,”saidParkinson
He also pointed out that Shanghai FTZ’s
practice of opening up more service sectors
to foreign investment will attract Western
countries like the United Kingdom, which are
service-based, to further export their services
to China. n
jijing@bjreview.com
up drive in the late 1970s, the Chinese
Government has offered foreign firms special
national treatment, exemplified by a lower
tax rate or tax exemption and cheap land
rent fees.
“These preferential treatments have been
growing increasingly incompatible with the
demand for fair competition of the market
economy and imminent change,” said Kuang
Xianming, Director of the Center for Economic
Transition under the Hainan-based China
InstituteforReformandDevelopment.
“As the special treatment is being phased
out, foreign companies will be subject to more
uniform supervision, fairer treatment and more
transparentrules,”Kuangadded.
“China is becoming less and less attractive
to foreign companies as a workshop or manu-
facturing base, because countries like India, Viet
CHENFEI
EASY ACCESS: Company
representatives go through
company registration processes
at the service hall of the China
(Shanghai) Pilot Free Trade Zone
on September 29, 2014